Fair Value (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Fair Value, Assets and Liabilities Measured on a Recurring Basis

The following tables display the assets and liabilities measured at fair value on a recurring basis including financial instruments elected for the fair value option. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items; therefore, they do not directly display the impact of our risk-management activities.



	Recurring fair value measurements
March 31, 2019 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Investment securities
Equity securities (a)	$	525	$	—	$	11	$	536
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	1,941		1		—		1,942
U.S. States and political subdivisions	—		781		—		781
Foreign government	7		165		—		172
Agency mortgage-backed residential	—		18,844		—		18,844
Agency mortgage-backed commercial	—		320		—		320
Mortgage-backed residential	—		2,886		—		2,886
Mortgage-backed commercial	—		723		—		723
Asset-backed	—		668		—		668
Corporate debt	—		1,294		—		1,294
Total available-for-sale securities	1,948		25,682		—		27,630
Mortgage loans held-for-sale (b)	—		—		15		15
Interests retained in financial asset sales	—		—		4		4
Derivative contracts in a receivable position
Interest rate	—		20		2		22
Total derivative contracts in a receivable position	—		20		2		22
Total assets	$	2,473	$	25,702	$	32	$	28,207
Liabilities
Accrued expenses and other liabilities
Derivative contracts in a payable position
Interest rate	$	—	$	19	$	—	$	19
Foreign currency	—		1		—		1
Other	1		—		—		1
Total derivative contracts in a payable position	1		20		—		21
Total liabilities	$	1	$	20	$	—	$	21


(a)	Our investment in any one industry did not exceed 15%.


(b)	Carried at fair value due to fair value option elections.



	Recurring fair value measurements
December 31, 2018 ($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Investment securities
Equity securities (a)	$	766	$	—	$	7	$	773
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	1,850		1		—		1,851
U.S. States and political subdivisions	—		802		—		802
Foreign government	7		138		—		145
Agency mortgage-backed residential	—		17,138		—		17,138
Agency mortgage-backed commercial	—		3		—		3
Mortgage-backed residential	—		2,686		—		2,686
Mortgage-backed commercial	—		714		—		714
Asset-backed	—		723		—		723
Corporate debt	—		1,241		—		1,241
Total available-for-sale securities	1,857		23,446		—		25,303
Mortgage loans held-for-sale (b)	—		—		8		8
Interests retained in financial asset sales	—		—		4		4
Derivative contracts in a receivable position
Interest rate	—		37		—		37
Foreign currency	—		4		—		4
Total derivative contracts in a receivable position	—		41		—		41
Total assets	$	2,623	$	23,487	$	19	$	26,129
Liabilities
Accrued expenses and other liabilities
Derivative contracts in a payable position
Interest rate	$	—	$	37	$	—	$	37
Total derivative contracts in a payable position	—		37		—		37
Total liabilities	$	—	$	37	$	—	$	37


(a)	Our investment in any one industry did not exceed 9%.


(b)	Carried at fair value due to fair value option elections.

Fair Value, Assets Measured on a Recurring Basis, Unobservable Input Reconciliation

The following tables present the reconciliation for all Level 3 assets and liabilities measured at fair value on a recurring basis. There were no transfers into or out of Level 3 in the periods presented. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The Level 3 items presented below may be hedged by derivatives and other financial instruments that are classified as Level 1 or Level 2. Thus, the following tables do not fully reflect the impact of our risk-management activities.



	Level 3 recurring fair value measurements
			Net realized/unrealized gains														Fair value at March 31, 2019		Net unrealized gains still held at March 31, 2019
($ in millions)	Fair value at Jan. 1, 2019		included in earnings			included in OCI		Purchases		Sales			Issuances		Settlements				included in earnings		included in OCI
Assets
Equity securities	$	7	$	4	(a)	$	—	$	—	$	—		$	—	$	—	$	11	$	4	$	—
Mortgage loans held-for-sale (b)	8		1		(c)	—		90		(84		)	—		—		15		—		—
Other assets
Interests retained in financial asset sales	4		—			—		—		—			—		—		4		—		—
Derivative assets	—		2		(c)	—		—		—			—		—		2		2		—
Total assets	$	19	$	7		$	—	$	90	$	(84	)	$	—	$	—	$	32	$	6	$	—


(a)	Reported as other gain on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.


(b)	Carried at fair value due to fair value option elections.


(c)	Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.



	Level 3 recurring fair value measurements
	Fair value at Jan. 1, 2018		Net realized/unrealized (losses) gains						Purchases		Sales			Issuances		Settlements			Fair value at March 31, 2018		Net unrealized losses included in earnings still held at March 31, 2018
($ in millions)			included in earnings				included in OCI
Assets
Equity securities	$	19	$	(4	)	(a)	$	—	$	—	$	—		$	—	$	(3	)	$	12	$	(5	)
Mortgage loans held-for-sale (b)	13		1			(c)	—		59		(66		)	—		—			7		—
Other assets
Interests retained in financial asset sales	5		—				—		—		—			—		—			5		—
Derivative assets	1		—				—		—		—			—		—			1		—
Total assets	$	38	$	(3	)		$	—	$	59	$	(66	)	$	—	$	(3	)	$	25	$	(5	)


(a)	Reported as other loss on investments, net, in the Condensed Consolidated Statement of Comprehensive Income.


(b)	Carried at fair value due to fair value option elections.


(c)	Reported as gain on mortgage and automotive loans, net, in the Condensed Consolidated Statement of Comprehensive Income.

Fair Value Measurements - Nonrecurring Basis

The following tables display assets and liabilities measured at fair value on a nonrecurring basis and still held at March 31, 2019, and December 31, 2018, respectively. The amounts are as of the end of each period presented, which approximate the fair value measurements that occurred during each period.



	Nonrecurring fair value measurements								Lower-of-cost or fair value reserve, valuation reserve, or cumulative impairment			Total gain (loss) included in earnings
March 31, 2019 ($ in millions)	Level 1		Level 2		Level 3		Total					Total gain (loss) included in earnings
Assets
Loans held-for-sale, net
Automotive	$	—	$	—	$	18	$	18	$	—		n/m	(a)
Other	—		—		74		74		—			n/m	(a)
Total loans held-for-sale, net	—		—		92		92		—			n/m	(a)
Commercial finance receivables and loans, net (b)
Automotive	—		—		83		83		(18		)	n/m	(a)
Other	—		—		30		30		(40		)	n/m	(a)
Total commercial finance receivables and loans, net	—		—		113		113		(58		)	n/m	(a)
Other assets
Repossessed and foreclosed assets (c)	—		—		12		12		(1		)	n/m	(a)
Nonmarketable equity investments	—		—		2		2		—			n/m	(a)
Equity-method investments	—		—		1		1		(3		)	n/m	(a)
Total assets	$	—	$	—	$	220	$	220	$	(62	)	n/m

n/m = not meaningful

(a)

We consider the applicable valuation allowance, loan loss allowance, or cumulative impairment to be the most relevant indicator of the impact on earnings caused by the fair value measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the respective valuation allowance, loan loss allowance, or cumulative impairment.


(b)	Represents the portion of the portfolio specifically impaired during 2019. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.


(c)	The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.



	Nonrecurring fair value measurements								Lower-of-cost or fair value reserve, valuation reserve, or cumulative impairment			Total gain (loss) included in earnings
December 31, 2018 ($ in millions)	Level 1		Level 2		Level 3		Total					Total gain (loss) included in earnings
Assets
Loans held-for-sale, net
Automotive (a)	$	—	$	—	$	210	$	210	$	(2	)	n/m	(b)
Other	—		—		96		96		—			n/m	(b)
Total loans held-for-sale, net	—		—		306		306		(2		)	n/m	(b)
Commercial finance receivables and loans, net (c)
Automotive	—		—		84		84		(10		)	n/m	(b)
Other	—		—		55		55		(46		)	n/m	(b)
Total commercial finance receivables and loans, net	—		—		139		139		(56		)	n/m	(b)
Other assets
Nonmarketable equity investments	—		—		1		1		(1		)	n/m	(b)
Equity-method investments	—		—		3		3		—			n/m	(b)
Repossessed and foreclosed assets (d)	—		—		13		13		(1		)	n/m	(b)
Total assets	$	—	$	—	$	462	$	462	$	(60	)	n/m

n/m = not meaningful


(a)	Represents loans within our commercial automotive portfolio. Of this amount, $104 million was valued based upon a sales price for a transaction that closed in January 2019, and $106 million was valued using a discounted cash flow analysis, with a spread over forward interest rates as a significant unobservable input utilizing a range of 0.08–1.09% and weighted average of 0.72%.

(b)


(c)	Represents the portion of the portfolio specifically impaired during 2018. The related valuation allowance represents the cumulative adjustment to fair value of those specific receivables.


(d)	The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

Financial Instruments Disclosure

The following table presents the carrying and estimated fair value of financial instruments, except for those recorded at fair value on a recurring basis presented in the previous section of this note titled Recurring Fair Value. When possible, we use quoted market prices to determine fair value. Where quoted market prices are not available, the fair value is internally derived based on appropriate valuation methodologies with respect to the amount and timing of future cash flows and estimated discount rates. However, considerable judgment is required in interpreting current market data to develop the market assumptions and inputs necessary to estimate fair value. As such, the actual amount received to sell an asset or the amount paid to settle a liability could differ from our estimates. Fair value information presented herein was based on information available at March 31, 2019, and December 31, 2018.



			Estimated fair value
($ in millions)	Carrying value		Level 1		Level 2		Level 3		Total
March 31, 2019
Financial assets
Held-to-maturity securities	$	2,387	$	—	$	2,374	$	—	$	2,374
Loans held-for-sale, net	92		—		—		92		92
Finance receivables and loans, net	128,767		—		—		131,541		131,541
FHLB/FRB stock (a)	1,180		—		1,180		—		1,180
Financial liabilities
Deposit liabilities	$	54,899	$	—	$	—	$	55,106	$	55,106
Short-term borrowings	6,115		—		—		6,119		6,119
Long-term debt	41,490		—		23,038		20,661		43,699
December 31, 2018
Financial assets
Held-to-maturity securities	$	2,362	$	—	$	2,307	$	—	$	2,307
Loans held-for-sale, net	306		—		—		306		306
Finance receivables and loans, net	128,684		—		—		130,878		130,878
FHLB/FRB stock (a)	1,351		—		1,351		—		1,351
Financial liabilities
Deposit liabilities	$	51,985	$	—	$	—	$	51,997	$	51,997
Short-term borrowings	9,987		—		—		9,992		9,992
Long-term debt	44,193		—		23,846		21,800		45,646


(a)	Included in other assets on our Condensed Consolidated Balance Sheet.